Episode 115: Does Anyone Know What A Prediction Market Customer Is Worth?

[Music] Hello and welcome to Zero Latency, the podcast from Ilas and Crytic Gaming. I am your host Brad Allen and this episode is brought to you by Optimov, the creator of positionless marketing and the number one player engagement solution for IGamingo Sports betting operators. My guest today is Charles Gillespie, CEO of gambling.com group for at least one more month and we are going to talk today about affiliate, about AI, about rich markets because gambling.com sits quite neatly in the middle of all of these. So welcome Charles, how you doing? Hey Brad, all good here. Thanks for the invitation. Very happy to catch up. Nice. So let's start with the stock because I'm sure we've got a lot of speculators listening, most of the gambling industry speculators in one form or the other. And you have been publicly saying for a while now that you are buying the stock of gambling.com group that your ex-exec team have been buying the stock that you are undervalued. So I guess this is two-pot question. Why is the company undervalued? What about the current market is forcing the share price down and why is the market wrong? Well I pointed a couple different things. The sector in the United States is down overall quite a bit. Prediction markets have taken the wind out of draft kings and Fandall which set the tone from an equity market perspective. We're doing well with prediction markets. We can talk about that later. But the sector has just not been trading very well for the last couple of months and then you've got the kind of small cap dimension of this as well, small caps have not traded very well either. But a lot of what drives US equities is momentum and that kind of it can it overshoots on both ends. If you're doing well, the valuation might go through the stratosphere. If you're not doing so well, the valuation can hit the ground. We're doing fine. We had a very nice 2025. Our expectations for this year is for EBITDA to be down a touch in 2026 on 2025. But behind the scenes, you've got a marketing business which is stable and you've got a sports data services business which is growing very quickly indeed which I think is increasingly the bulk of the value of the organization. The marketing business is a cash cow. It still makes a ton of money. It has a very bright future. But I think all things equal investors will put a higher multiple on the sports data services business. It's driven on data, not Google search rankings or anything that's exposed to any meaningful way to AI. I think AI is a tailwind for the sports data services business where the popular narrative around the marketing business is that it's a headwind. Now it's also a tailwind in certain respects and we've got some new products coming this year which we're going to turn that headwind into more of a tailwind. We're certainly not negative about the marketing business. It's all large affiliates. I think you've had a little bit of a challenging quarter or two but if not a couple of years. But we are still very bullish about the future of the marketing business. And for people less familiar with gambling.com, the marketing business is more of the traditional affiliate SEO style business with brands like Rotawire. And then the data services is the, I believe is the business you required a year or two back now like odds jam and optic odds. And obviously within that odds jam is more consumer facing, sort of pointing out Arbs and a lot more tools like that for people to try and make money betting. And then optic odds is for operators and it's providing a lot of odds essentially. Is that accurate? That's exactly it Brad. The optic odds side of the Sforced Data Services business is the fastest growing part of the whole company. Also within Sforced Data Services is the data side of Rotawire. You know there's a marketing side of Rotawire but then there's also a data side to Rotawire. We sell to quite a few professional sports teams, leagues, major sports brands and publishers in the United States. That's got a very substantial and long-term client base as well on the data services side. So just again back to the share price. I was listening to you all, I think Q425 cool and seemed a little bit exasperated just that you know I think one of the analysts said your stock is trading it, like four times trailing free cash flow. So very cheap and I think you said something like our priority is to make the stock work. But if that doesn't work we'll consider other options basically. Then that implies to me like management buy out something like that, taking it private, is that on the table? It's not a plan A I think at some point we need to pencil that up and do the math on that otherwise we wouldn't really be doing our jobs but plan A for the moment very much remains to make the stock work in the public environment. And like I said we've got some new products coming a few announcements this year which I think will be positive and yeah you know we'll reassess where we're at I think at the year end but plan is to make it work. So on a similar note I'm sure you watched with interest the legend and genius sports deal genius acquiring legend or kind of similar affiliate business. For a big sum one billion was it more than one billion? It was yeah there was at least a billion on there and obviously since then the genius sports stock along with everything else and again the industry has gone on a steady downward trend. Are you surprised by that? Yeah I think that's fair. I think we were surprised in kind of multiple ways about that deal. You know we didn't have any indication that genius was seriously looking at affiliates we had not spoken to them at all. I would have thought you know if somebody was going to make a big play they would perhaps had a look around the wider sector but yeah they seemed to have their heart set on legend and went straight at that and and that's the deal they'd done so you know I'm an Nick for a very long time top guy incredible operator very talented affiliate. You know and there's also a lot of speculation about the size of legends over the years and you know finally getting some numbers and the press release was I'm sure you know satisfy a lot of people's curiosity about exactly what size that business was and you know let's be honest it's I think it's a huge business and it's you know I think I think let's give Nick his flowers that's got to be the most successful affiliate business in the industry so you know I've got nothing to get but good things to say about all of it you know it's very I was disappointed for everybody to see the genius share price not trade well on the back of that news given that it is such a great affiliate business you know I think American investors are very familiar with the online gambling affiliate business. I've spent five years explaining it to them and you know a lot of the funds that invest in the sector invest across the sector and different names so you know I think I think the American investors that you know are ingenious and other companies had a had a reasonably high degree of familiarity with the business and they you know it is what it is but you know I think there's some real interesting there should be some interesting synergy there for genius on the media buying side obviously they've got they're bringing a lot to bear in terms of their reach with programmatic and I think you know that must have been an important part of their thesis to do that deal so we'll certainly be watching closely to to see how the whole thing develops for genius but you know it's great to have another listed affiliate in the United States you know we took the company public in 2021 I thought it wouldn't be more than a year or two before BC or Katina or somebody followed us to the US and you know it's been five years and that genius deal hasn't closed yet so you know as it stands we remain the only publicly traded affiliate in the United States sounds like you would have liked to call from genius before they made that acquisition it's just it's just curious you know they said they said in the press release themselves that they didn't evaluate any other affiliate businesses it's cured This episode is sponsored by Optimoove. Discover how operators are using positionless marketing to launch personalized CRM campaigns, dynamically change casino lobbies and bet slips and create engaging gamified experiences. Learn more at Optimoove.com. To see how this approach comes to life, Optimoove Connect returns to London on March 11 and 12, 2026. It's the only user conference where marketers around the world share real-world results of positionless marketing, driving efficiency and ROI. Register now at connect.optimoove.com. Right, let's talk about some AI, can we please? Every company you speak to, we're using AI, we're speeding up our coding, and I've seen, again, this into your last call, you spoke about being early adopters, being ahead of the curve here. So I wondered if you just share any examples of what you guys have actually tangibly done with AI inside the company? Yeah, sure. Well, I think 80% of our software code produced at this point is written by AI. That's kind of table stakes at this point. You've got to now move on to this agentic led strategy where staff are managing fleets of agents that are doing various things for the organization. Certainly, a lot more coming. I think we're very focused on automating a lot of process within the finance team as well as the general corporate overhead. There's obviously advantages there in terms of content production, but you also need to make sure that the content remains very high quality. Of course, it still needs to be reviewed and edited by humans, but just in terms of ideation and first pass drafting, it's clearly very useful. The Opticods team and the OJM team have certainly embraced all this stuff very early. I'm sure there, 80% of that code is also no doubt written by AI and that just increases the execution, the loss of the whole thing. The benefits are not theoretical with us. It's very real at this point. At the same time, flipping it around, the AI has obviously changed the way the business needs to run because you used to do a lot of SEO. Now it's AI, SEO, what's other than all that, it's exactly cool. How easy is it to flip from one to the other? Instead of optimizing for traditional Google search now, I assume now a big focus is optimizing for these LLMs and getting them to direct people to your sites and content. Is that easy to do? Yeah, it's not very different than optimizing for SEO. What you're doing with SEO is obviously trying to create high quality content, but then all these quality signals that shows that you really are the authoritative source for the content you're producing and those quality signals are by and large the same that you would want to produce to optimize for LLMs. There are different tricks for those two different audiences. I'm not going to get into the details on that, but you can refine those strategies for each channel. What's going on at the moment with Search, I think people just assume with AI, people aren't using Google anymore, Google's dead, Google's search traffic is just not there. This doesn't make me money anymore. That's really not what's happening. If you look at Google's own search revenue over the course of 2025, I think it accelerated, grows in every single quarter, which is, you can plainly see that people are using more Google search than they have ever used in the history of the internet. What the headwinds that all publishers online are facing at the moment in particular companies that are in anything that deals with money, financial services is a prolific variation of spam content. Basically, with all these AI tools, it's gotten cheaper than ever to create AI sloped content. The smartest people at Google that used to police a lot of this stuff have moved on to flying cars and all the exciting new stuff that Google's building. We've got way more supply of garbage than you've ever had and you've got less policing of the search results in the first place. I'm not the first person to say this and that will be the last and it's not just a gaming industry thing. It's certainly not a gambling.com group thing. It's an internet wide thing with Google that the search result quality has really deteriorated and the quality real publishers out there like gambling.com are just being boxed out by spammers. I would assume Google and the past has always been very affected a deal with these things. I think their priorities are a little bit different today so that's why this has taken longer than I think a lot of people would have expected for them to deal with. You've had the UK gambling commission even reach out to Google on some of the most egregious cases, non-gamstock casinos, all this sort of stuff which is bubbling up to the top of the results. I think it gets dealt with at some point but we are transforming our business to be laster line on SEO and Q4. We had more revenue from non-SEO sources than SEO sources for the first time and of course sports data services is growing very rapidly and that isn't in any meaningful way dependent on Google. It barely has any revenue related to Google at all. Our future is certainly less with Google less central to our strategies. To your point about their lack of focus or losing focus, it does feel like even in the last week or so I felt that Google search is much worse than it used to be. I've seen other people say the same thing. Perhaps not the same focus on search and quality of the least out there. I wanted to ask you about the word affiliate because as part of that genius deal they were seem to be trying to avoid the use of the word affiliate, called legend and affiliate. Maybe that was just because of the way the stock market has treated affiliates in recent years but I wondered what you thought of that and whether you noticed that affiliate was a bit of a dirty word recently. It's funny because me and Kevin, the co-founder of this company, we've gone through this whole journey ourselves on what to call this thing. When we started out 20 years ago we thought affiliate was a bad word and we're like, "Oh, it's not an affiliate. It's a media business." Then we're like, "Okay, maybe it's a performance marketing business." We've bounced around to all these different words over the years and different chapters of the growth of the company. In reality it's an affiliate business. Now we do more than just marketing but we're all in the industry. We know what that is. Everybody in the industry knows what affiliate business is. I think these US investors also understand what affiliate business is. I'm not here to talk about our competitors but I think they, genius, have clearly a vision for the future which is a lot more than just classical affiliate if you will but classical affiliate is obviously the fly-in share of the legend business. I found it identified a lot with remarks about trying to describe it in a more compelling way than using the affiliate phrase but I think we've also just come full circle on that journey about what to call it and it is what it is. It's an affiliate business. Yeah, there's value in clarity in everyone knowing bang, affiliate. We know what that does. We acquire customers, send them to sportsbook and people know exactly what you're talking about. I think that's useful personally. Maybe that's the journalist in me. Now I also wanted to ask you quickly about this lawsuit filed against Ods Jam again when maybe a year or more now by swish analytics. Essentially saying that I think you were or Ods Jam were taking their IP or optical ads specifically were taking their IP by scraping their odds when they were live on operator sites. Any update on the in that case, whether it's progressing? - Can't talk about it specifically. It's still out there. It's not like we have access to any proprietary information from Swiss analytics. We see the same thing that every other company in the industry sees, which is the publicly available odds on any operator's website. And it's not only difficult, it's literally impossible to know if any of that came from any supplier in the industry. And it also really stretches the imagination to understand how that could somehow be claimed to be someone's IP after it's gone through the entire risk management process of a major sports betting organization. Once you bake a cake with flour and eggs, you can't get your flour and eggs back. It's finished. It's a different thing. - No, definitely a case that a lot of people in the industry will be interested in whatever happens, but just because the prevalence of scraping, like I'm sure many, many companies are scraping it. So they've been interested to see whether what the legal view of that is. - Right, I must ask you about prediction markets quickly. And I think you said earlier that this has been a good thing for the company. And I assume you're sending customers to prediction markets. Now, the first thing I want to ask you about was customer value. Because I feel like, within nobody really knows what the value of a prediction market customer is yet speaking to an operator recently who was getting into that business. He said, we don't know how we're going to make money out of this yet. We just have to get some customers in the door, get the data and work it out. But obviously, I assume you are ascribing a value. So it took me through customer value. What the acquisition costs here? What are you doing? CPAs? Are you doing rev shares? What was going on in prediction market world? - Yeah, so what we're doing with prediction markets is really more on this worst data services side. We're doing a bit on the marketing side, not big volume. But I think everything you said is correct. It's early days. They're not in the monetization phase. They're in the land grab phase. They're not really struggling to sign up new customers for these products. It's the hottest thing in America at the moment. So there's a lot of direct traffic to these websites. They do work with affiliates. And we do work with all the big names in the sector. But it's, yeah, there's no, I don't think anybody has clarity on the unit economics and again, it's different major players in the space are trying to maybe try to drive down the push other players out of the marketplace by under monetizing the traffic at this early stage, again, purely to be focused on market share. So it may be some time before we all actually understand what the true unit economics are here before, the actual major prediction market exchanges actually genuinely attempt to make money themselves and move on past the kind of land grab stage. But where we're doing very well is with data on this worst data services side. So Opticods has, you know, for those, you know, they aren't familiar with the product. It's like a Bloomberg terminal for odds, right? If you're a major international sports book, you've got, you know, people all around the world trying to take money from you, hit you on any sort of mispriced event you've got, running arbitrage, et cetera. So you need to know where all your peers are at in order to just do elemental, you know, sports book risk management. Getting that data cleanly, easily with low latency is very, very valuable to these sports books. What is also valuable in particular to professional sports bettors and Wall Street hedge funds that are very interested in trading on prediction markets is having not only that odds data, but having it mapped into the prediction market data as well, which we have. So when you, you know, if you wanted to trade sports event contracts on culture, your polling market, you can come to us and Opticods can provide you with a feed of, you know, all the different sports books, you know, around the world and that's pre-mapped into those event contracts. So, you know, you still need to obviously do your own algorithms and risk management and whatnot, but it's a enormous head start to getting live in terms of trading sports event contracts and we've had really quite a bit of demand for that from not only North American players, but folks across Europe as well. Major and major, you know, like household, Wall Street household names, you know, famous sports betting syndicates, like it's an interesting client list. - I've heard you say that when prediction markets first came around, you kind of were skeptical thought, oh, you know, this is Betfair, didn't take off in the UK, but you have evolved your thinking, you've come around and you think there's some staying power here. - I do. You know, we all watched Betfair grow up and we thought it was kind of the killer app and all the sports books are gonna die and everybody's gonna use Betfair and then, you know, here we are 15 years later and sports books are still doing very well in the UK. And Betfair is doing, it's also doing okay, but it's become very professionalized. I think the metaphor from poker is relevant here, you know, in the beginning, there's a lot of retail money then you get that attracts sharps, sharps eat the fish. At some point, if there's no fish left, there's sharps have nothing to eat and get bored and move on. So I think part of the kind of question here is how, how many fish are in the US and how long are they gonna last? And is there, you know, is there a bright two, three, four years, five years ahead of us? - Absolutely. - I think that's crystal clear. But, you know, at scale, you know, 2030, what does kind of steady state ecosystem dynamics look like for prediction markets? Is there enough fish there to balance out the sharps? Because the sharps are, you know, coming in droves, you know, 'cause they call us first. There's no shortage of sophisticated sharps entering this marketplace. So the big question is, yeah, is it sustainable on that basis? - Yeah, I saw, I sort of tweet yesterday saying, there are guys on this website who can't cook eggs for themselves, but they're trading oil against citadel. And it's the same concept, you know, as guys sitting at home on their laptop, trading against star lizard or Susquehana or deal trading. And it's not gonna go well from the long run. - No, but at the same time, right, with Claude Code and all these AI tools, you know, people can create quite sophisticated stuff quite quickly. That doesn't mean they have sophisticated risk management. But, you know, if you have some sort of proprietary data source, if you have some sort of interesting angle on the marketplace, I, you know, there's more opportunity than there's maybe you've ever been, right? I mean, you know, if you're a talented sports better without prediction market, you get stopped out and you get your account closed and it's difficult to get money down. But the beauty of these prediction markets is, you can potentially get quite a bit of money down. So if you've got a winning strategy, there's capacity. And clearly that's appealing to people. So, you know, look, I think, you know, when I was in New York for our awards party and the last year we had a bunch of young entrepreneurs there. And, you know, it felt like, you know, every other 25-year-old in New York City was building something for prediction markets. And, you know, clearly there's a lot of energy there. And, you know, I think we got it, you know, I don't know if it's 10 years, but it's definitely four or five years of a lot of heat and energy on this space and interesting growth. And that extends to your company as well. Last thing you want to ask you about was your transition. So you announced, I think last month now, planning to move on from CEO to exec chair, maybe in around a month or so. So, yeah, if you can share any reasons why and what you'll be focusing on. Sure. So we are lucky to have two co-founders of this business. I started the company with Kevin Macrystal 20 years ago. He's been in the COO role from day one. I've been in the CEO role from day one. Coming up on 20 years, you know, that's quite a long time. I've spent my entire adult life building this business. And for a long time, I've regarded. Kevin is our secret weapon. He is an incredibly talented operator. He is in the weeds on everything. He's incredible on organizational design, reporting lines, how to design a team, align incentives and centerize people, bonus is just like the whole nine yards. He knows how to recruit and motivate a very talented team and just deliver day to day. And for a long time, what I've been doing is kind of blocking and tackling for him, making sure that we give him room to cook so that he didn't have to deal with investors. And I tried to take as many things off his plate as I could to let him focus on what he's good at. But as we're getting into this kind of next phase of the business, AI is obviously gonna revolutionize every single white color, heavy white color, dependent business on planet Earth. And I think vastly more profound ways than the average company probably understands today. I've been very, I'm a technologist. I taught myself to program at a young age. I built all of our early software systems. I've been reading books about exponential growth of technology for 20 years. And it's unbelievable to me how perfectly the development of all this stuff is tracking with these predictions that were made 20 years ago. So I'll be kind of leading on the conceptual side of the AI transformation, but it felt like as good a time as any to shake the tree a little bit, give Kevin full reigns to run the business and let him start this new chapter with a very clear and strong mandate to take the company forward. I'm still involved, I'm still chairman. My new title is executive chairman. So that means I'm still running the board. And I'll handle any kind of strategic M&A conversations and also day to day M&A, anything that comes up. We're not in a highly inquisitive mode at the moment, but there's always various opportunities. And I'm the one that's kind of got the most industry visibility and relationships. So I'll continue to handle that. Lastly, I'll just say, you know, the business is also the center of gravity is moved from Europe to the US and Kevin's in the US. He's in North Carolina at our US headquarters. We're building a center of excellence around him. I still live in Europe and you know, the future of the company is clearly more North American and that's having Kevin in the leadership role. I think that's good from a geographic perspective as well. Have you been building anything cool with Claude Code? I've got a server here in my office that I tinker with just to, you know, hack out random things to try to stay current and not lose sight of what modern software development practices look like. I've got a, I've got a villa with a 30 year old water management system with old cisterns. And I did use Claude Code to hack into my like, you know, ancient cobalt generation system there to, I bought this villa and I inherited all this stuff. So I had no instructions or anything else on it. But yeah, I have used Claude Code to decipher that and build me a water management system to make that thing run more. A natural use case for AI. Right Charles, I'll let you go, but thanks again for your time and good luck with the transition and the company. Thanks Brad, always a pleasure. Take care. And to our listeners, if you'd like to hear more from the work we do at ILS, drop me a line on LinkedIn and I'll point you in the direction of our monthly reports and research. And thank you all for listening. (upbeat music) (upbeat music)